World Bank: U.S. Fourth Friendliest Country For Business

by: October 25, 2011

The debate over regulation has been in the news lately, because it’s been a point of conversation among the 2012 presidential candidates. The Republicans have said that over-regulation has kept businesses from expanding and creating jobs. But a new report from the World Bank that measures business regulation is throwing some cold water on the side that thinks the U.S. is a hostile place for business.

According to the bank’s annual listing, the United States is fourth on its “ease of doing business” rank. It trails only Singapore, Hong Kong and New Zealand.

The one area where the US comes up short? The ease of paying taxes–based on the number of payments, the time spent, and the total tax rate, we rank 72nd in the world. According to the report, the average business spends an average of 187 hours per year filing taxes, with a total tax rate of 46.7 percent–considerably above the 35 percent average that’s typically cited. So, yes, the World Bank report takes some of the steam out of conservative complaints about overly burdensome business regulations in the US. But complaints about the corporate tax code still resonate.

Here is one example of how the ease of do- ing business index is constructed. In Korea it takes 5 procedures, 7 days and 14.6% of annual income per capita in fees to open a business. There is no minimum capital required. On these 4 indicators Korea ranks in the 18th, 14th, 53rd and 0 percentiles. So on average Korea ranks in the 21st percentile on the ease of starting a business. It ranks in the 12th percentile on getting credit, 25th percentile on paying taxes, 8th percentile on enforcing contracts, 7th percentile on resolving insolvency and so on. Higher rank- ings indicate simpler regulation and stronger protection of property rights. The simple average of Korea’s percentile rankings on all topics is 21st. When all economies are ordered by their average percentile rankings, Korea stands at 8 in the aggregate ranking on the ease of doing business.

It adds that the rankings do not take into account things like infrastructure and the strength of its financial systems.